June 27, 2007

April 4, 2007

Note to readers: This story has been reposted. Since the report was originally released, the Center for Public Integrity has changed the way it calculates lobbying expenditures to reflect a more stringent methodology for determining the total amounts. The change was made to correct the potential overstatement of totals. Figures or relevant text that have been changed are indicated with asterisks. (2/28/2006)

When a conservative member of Congress floated the idea of allowing consumers to pick which channels they want to pay for rather than having to buy a "bundle" of channels they may never watch, it seemed like a pretty good idea.

Rather than pay a flat fee for dozens of channels, consumers could choose a handful of channels "a la carte," or from a menu—and possibly pay far less for their service.

Among the hundreds of initiatives tracked by the cable television industry and its army of lobbyists, a la carte is among the most feared. A re-regulation of the industry could cost cable companies control over programming and jeopardize an economic model that has helped the industry maintain huge profits over the years. The industry has argued that a la carte service would increase costs to consumers rather than lower their cable bills.

In addition to warning of higher prices, the industry's chief argument for bundling channels is that cable networks that cater to minorities will wither and die if people are allowed to choose their own programming.

The cable industry, largely unregulated since 1999, has had a problematic track record with consumers. Cable prices have risen 40 percent from 1997 to 2002 and subscribers in 98 percent of markets have only one cable provider, according to a study by the Government Accountability Office.

Surveys by J.D. Power show a low level of public satisfaction with cable service providers.

But rather than spark an uprising of consumer support, the proposal to offer channels on an a la carte basis was blasted by elected officials at every level of government. Joining the chorus were nationally known and respected civil rights organizations and a large collection of women's groups, all of whom appeared to be singing from the same page.

A Center for Public Integrity investigation of hundreds of filings with the Federal Communications Commission, lobbying reports and other documents reveals that the "grass roots" opposition to a la carte is actually a highly sophisticated lobbying campaign where seemingly disinterested third parties—like nonprofits and legislators—are spreading the anti-a la carte message using minority programming as the key issue.

In fact, rather than being disinterested, these third parties have much to gain. The Center has identified hundreds of thousands of dollars in donations and other benefits showered by cable companies on some of these nonprofits. The Center also found one instance in which free airtime was made available to a mayors group and identified nearly $60,000 in contributions to one key pro-cable congressman.

One measure of the campaign's effectiveness is an August 13, 2004, comment filed by the National Cable and Telecommunications Association, the key lobbying arm of the cable television industry, with the Federal Communications Commission, pointing out the overwhelming number of letters that had been filed in opposition to a la carte. Among those letters pointed out by the NCTA, some 64 were from nonprofits and politicians whose comments were derived from one of five basic form letters, one of which was written by four cable executives, another circulated by an industry lobbyist.

It is not unusual for a special interest group to orchestrate mass-mailing campaigns, on either side of the political spectrum. But what's not so common is for nationally recognized civil rights leaders, members of Congress, city council members and state legislators to sign their names to an industry-generated letter.

Among the signers of one of the five letters were two members of Congress, six mayors, seven members of the New York City Council, six members of the New York state legislature, one Florida state legislator, one Arizona state legislator, one Illinois state legislator and the comptroller of the state of Connecticut.

"The difference with this campaign, the ethnic community is at the vanguard," said Brian Woolfolk, who is working pro bono for small cable networks that are in favor of a la carte pricing. "Strategically, it completely disarms the Democratic caucus. The Democratic caucus is going to be sensitive to civil rights organizations and civil rights issues."

Among the minority nonprofits who signed form letters in opposition to a la carte pricing were the National Urban League, the Rainbow/PUSH Coalition and the National Congress of Black Women Inc.

Odd bedfellows

The cable a la carte issue actually dates back to the 1980s, when cable companies offered it as a pricing option. Though a la carte service never caught on, demand for the option resurfaces periodically depending on the level of public dissatisfaction with service and cost. By March 31, 1999, provisions of the Telecommunications Act of 1996 had phased out cable price regulation and prices began to spiral upward. But the a la carte issue got red hot exposure when conservative groups started pushing the issue.

The Janet Jackson Super Bowl stunt emboldened social conservatives like Rep. Nathan Deal, a Republican from Georgia, to push for a la carte as a means to keep risqué programming out of households that don't want it. Joining the cable a la carte debate was Consumers Union and its senior director of policy Gene Kimmelman, albeit grudgingly.

"A la carte emerged in the consumer agenda only after efforts to prevent concentration of ownership and price gouging all failed," he said. "It was kind of a fall-back position. It was never viewed as the totally optimal approach."

Kimmelman and others expected resistance from the industry. But they were certainly caught off guard by the allies that cable mustered to its side.

The Congressional Black Caucus, which was founded in 1969, is a group of 39 lawmakers who list among their legislative priorities the creation of a living wage, guaranteed health insurance for all Americans, and strengthening and better enforcing civil rights laws. The caucus has long been concerned with the lack of diversity in cable programming, ownership and in the senior ranks of system operators. Early last year, the caucus, led by Rep. Bobby Scott, D-Va., wrote a letter to the cable industry threatening severe regulatory consequences if cable's prospects for minorities did not improve.

"Since we have not seen ample progress in the diversification of content and ownership to assuage our apprehensions, we may no longer be able to justify our current hands-off approach to regulating the cable industry," the letter reads in part.

A portion of the letter was published in a trade magazine, but it was never actually mailed, according to Woolfolk, its author. A series of meetings between cable television representatives and the caucus followed, and the diversity issue appeared to fade away.

Not long after the meetings, the a la carte movement began to get some traction thanks to the Janet Jackson scandal and general public outrage regarding indecent broadcasting. Deal authored an amendment to a bill that would require cable and satellite companies to give customers the option of buying channels one at a time, rather than as a package.

Alfred Liggins, chairman of TV One, a new African-American-themed cable television network co-owned by broadcaster Radio One and cable giant Comcast Corp., wrote an April 12 op-ed piece in the Washington Times arguing against the idea. Liggins, whose network benefits from being bundled with other channels, argued that minority networks would be squeezed out if consumers were allowed to choose their own channels.

On May 12, the Congressional Black Caucus went from being a key cable industry threat to an ally.

The caucus sent a letter to Reps. Joe Barton and John Dingell, the chairman and ranking member of the House Committee on Energy and Commerce respectively, arguing against the a la carte idea. The letter, which quotes the Liggins piece in the Washington Times, shifted the focus of the a la carte debate from lowering consumer costs to preserving minority programming.

Over the past few years, the nonprofit Congressional Black Caucus Foundation—a separate and distinct entity from the caucus that nevertheless boasts 11 caucus members on its board of directors and two caucus members among its top officers—has drawn considerable support from the cable industry.

In its 2002 annual report, the foundation, which ranks donors within ranges, lists Time Warner (then AOL Time Warner) as contributing between $50,000 and $99,999. In the 2003 report, the company jumped a tier, contributing between $100,000 and $249,999. Comcast also upped its contribution, from between $30,000 and $49,999 in 2002 to between $50,000 and $99,999 in 2003.

Viacom companies are listed as contributing between $20,000 and $44,998 in 2002, but in 2003 only Viacom was listed as contributing between $5,000 and $14,999. The NCTA donated between $5,000 and $14,999 in 2002 and 2003.

In addition, Comcast, the NCTA, Time Warner and Viacom are all regular sponsors of the caucus's annual legislative conference. In all, over the two years, those companies contributed as much as $589,991.

Calls to the director of communications for the Congressional Black Caucus were not returned.

Touching off the deluge

The same day the caucus sent its letter—May 12—another missive was directed at the Commerce Committee. Four cable executives—Debra Lee (BET Holdings Inc.); Jeff Valdez (Sí TV, a Hispanic-themed network whose investors include Time Warner and EchoStar); Johnathan Rodgers (TV One) and Kent Rice (International Channel, which was acquired by Comcast in July)—wrote the committee a letter objecting to the a la carte concept.

The executives' letter was posted on NCTA's Web site; the trade group has cited it in its filings with the FCC.

Portions of the letter were identical to the op-ed Liggins penned for the Washington Times.

It opens: "We understand that some Members of Congress have suggested requiring cable and satellite companies to sell basic cable networks on a channel-by-channel, or 'a la carte,' basis. On the surface, this idea sounds appealing, but a deeper look can only lead to the conclusion that a la carte packaging and pricing of programming would have a chilling effect on programming diversity in America."

A week later, Congress opted to bail out of the a la carte debate and let the FCC deal with it. Leadership of the House committee that regulates cable wrote a letter to FCC Chairman Michael Powell asking the FCC to study the issue. Sen. John McCain, chairman of the Senate Committee on Commerce, Science and Transportation, also wrote a letter, arguing forcefully for an la carte option. On May 25, the FCC officially opened the issue for comment, in anticipation of filing a report in the fall.

And the floodgates were opened.

On July 15, the NCTA released a study funded by the association that said a la carte would hike rates. The study, conducted by Booz Allen Hamilton Inc., determined that if cable operators had to offer all channels a la carte while still offering tiered programming, costs would rise between 7 percent and 15 percent just to outfit cable systems with the a la carte technology. Booz Allen argued that consumers would end up paying more for fewer channels, and an a la carte system would make it difficult for new networks (like minority themed channels) to get into the business.

Civil rights groups join debate

On the same day, the nation's "oldest, largest and most diverse civil and human rights coalition," the Leadership Conference on Civil Rights, also filed comments with the FCC opposing a la carte on grounds that it would hurt diversity in cable programming. The organization quoted Liggins in its filing.

The Leadership Conference counts among its victories passage of the Civil Rights Act of 1964, the Voting Rights Act of 1965, and the Fair Housing Act of 1968. More recently, the group has worked to eliminate the so-called "digital divide" in America and worked to provide the advantages of Internet access and other technology to disadvantaged schoolchildren.

In the a la carte issue, the civil rights organization sided with the cable companies.

On June 23, the LCCR in conjunction with TV One and others sponsored a lunch briefing opposing the a la carte effort. Titled "Cable A La Carte: The Beginning of the End for Media Diversity on Cable TV?" the event was organized by its lobbyist, Leslie Harris of Leslie Harris and Associates. Among Harris's other clients is Time Warner Inc.

Leading the charge for LCCR against a la carte was the group's deputy director, Nancy Zirkin, who targeted Kimmelman and Consumers Union specifically because he was supporting an issue that was also backed by conservative groups like the Parents Television Council and Concerned Women of America.

"Every one of these groups that Consumers Union is allied with has fought us on the increase of diversity," Zirkin said.

Zirkin could not be reached for comment for this report.

The AOL Time Warner Foundation reported in its calendar 2001 tax filing with the IRS that it pledged $100,000 to the Leadership Conference on Civil Rights and another $200,000 to the Leadership Conference Education Fund. For 2002, the foundation reported a payment of $100,000 to the Leadership Conference on Civil Rights.

Among contributions to other nonprofits who signed letters opposing cable a la carte, the AOL Foundation has given $300,000 to City Year, $100,000 in 2000, 2001 and 2002; and the Comcast Foundation has contributed $50,000 to the National Urban League, $78,600 to the Women in Cable & Telecommunications, $70,000 to City Year Philadelphia and $50,000 to City Year Detroit.

Each organization signed form letters supporting the cable industry.

Then the letter campaign began. First to be heard from were the civil rights groups. The first was from the National Congress of Black Women Inc., signed by national chairwoman C. DeLores Tucker on June 28.

"We would like to voice our concerns about the potential affects of requiring cable and satellite companies to sell basic cable networks on a channel-by-channel, or 'a la carte' basis," she writes. "On the surface, this idea sounds appealing, but a deeper look can only lead to the conclusion that a la carte packaging would have a chilling effect on programming diversity in America."

Tucker's letter is nearly a word for word copy of the one written by the cable executives. She also penned an op-ed piece published in the Boston Globe and Chicago Sun-Times arguing that "If these would-be regulators succeed, the diversity in cable programming—a fruit of the civil rights movement—will die with it."

Tucker led a high profile crusade against misogynist lyrics in rap music. Ironically, Tucker's chief target was Time Warner's music division. A call to Tucker's office was not returned.

Other groups who signed the same letter to the FCC as Tucker include the National Urban League, the Rainbow/PUSH Coalition and the Brotherhood Crusade.

Also submitting the same basic letter were three members of the board of directors of the National Conference of Black Mayors—Harvey Johnson Jr., mayor of Jackson, Miss., and president of the conference; Irene Brodie, mayor of the village of Robbins, Ill. and assistant secretary for the group; and Roosevelt F. Dorn, mayor of Inglewood, Calif. who is 2nd vice president of the mayoral conference. The letters were dated July 12.

On April 27, the group hosted its annual conference in Philadelphia, the hometown of Comcast. The conference's "premium" sponsors were Comcast and TV One, employer of Alfred Liggins. TV One president and CEO Johnathan Rodgers spoke at the event, which also included an "hour-long TV interview program that will include a panel of mayors discussing issues facing major urban cities and mayors today."

Another mayoral organization chimed in on the debate—the National Conference of Democratic Mayors. The NCDM lists the NCTA as a sponsor.

Cable goes to Towns

Among cable television's best friends is Rep. Edolphus Towns, a member of the Congressional Black Caucus who signed the May 12 anti-a la carte letter.

Towns also submitted another letter, this one to the FCC, on July 8. The letter was nearly identical to five others—one by Florida state Rep. Bob Henriquez, three by members of the New York state legislature and one by a New York City Council member.

But unlike those elected representatives, Towns is in a position to do more than comment on the issue. The one portion of his letter that does appear to be original reads: "As a senior member of the House Committee on Energy and Commerce, I implore you to reject the 'a la carte' system and urge you to keep diverse programming on the air," he wrote.

Any legislation that would re-regulate the cable industry would originate from that committee. Towns submitted his comment despite the fact that Chairman Barton, ranking member Dingell and three other representatives had asked the FCC to prepare the report on the feasibility of a la carte.

Since 1998, Towns has accepted $58,897 from the employees, their immediate family members, and the political action committees of the nation's largest cable television companies, sixth-highest among House Democrats over that period.

Towns spokesman Andrew Delia submitted a statement to the Center in response to a set of detailed questions.

"Congressman Towns believed and continues to believe that on the whole, an a la carte system would hurt niche and diversity programming. While there are legitimate concerns about diversity in the media, a la carte is not the solution to such a problem," the statement reads.

Towns contends that some channels would disappear if they were located on fewer systems because they would be unable to generate advertising revenue. Programmers would have to raise rates to make up the difference and niche channels would suffer. The result would be higher costs for consumers for fewer channels.

The response from the congressman's office did not answer the question of who wrote the letter he submitted to the FCC or whether the cable industry's support of his campaigns or the Congressional Black Caucus Foundation—Towns is a member of its board of directors—played a role in his position.

Bundling support

The cable industry found support in other quarters. Rep. Raul M. Grijalva of Arizona was one of 12 elected officials to sign another version of one of the industry's form letters. Grijalva is a member of the Congressional Hispanic Caucus. Among others who submitted the same letter were Hispanic officeholders in the New York state legislature and New York City Council in addition to a number of nonprofits.

In case the FCC was still unconvinced, the cable lobby had one more "grass roots" coalition join the battle—and this would be the largest outpouring yet. In late July and early August, a truly impressive cross-section of women's groups began sending letters to the FCC, asking it not to support cable a la carte pricing.

Once again, the letters sounded familiar. In fact, 30 of them were virtually identical. Among the signers were the Sexuality Information and Education Council of the United States, the Global Fund for Women, the Feminist Majority, American Women in Radio and Television Inc. and the National Council of Women's Organizations.

In this case, it wasn't hard to find the source. The firm of Leslie Harris, the Time Warner lobbyist who also represents the Leadership Conference on Civil Rights orchestrated the campaign. Her firm advertised its role on its Web site.

After being retained by a "major media company" Leslie Harris and Associates "organized a well-attended briefing where minority and women's programmers laid out the case against the proposal and then worked with dozens of organizations to file comments at the FCC. One measure of our success: working closely with Oxygen Media, we were able to organize over 30 prominent women's organizations against the proposal."

Harris filed a lobbyist registration statement listing Time Warner as a client on July 23. Harris, through a spokeswoman, declined to comment for the record.

Oxygen Media is a 24-hour cable television network aimed at women. Founded in 1998, the network is independently owned and now available in over 52 million cable households, according to its Web site. Its chairwoman and CEO, Geraldine Laybourne, is also on the board of directors of NCTA. Time Warner is an investor in the network.

The letters argue that the a la carte proposal could have a "significant negative impact on the so-called niche networks, such as Oxygen, that cater to particular interests or demographics such as women, minorities, gays and lesbians and non-English language speakers."

In a detailed email to NCTA senior director of communications Brian Dietz, the Center asked whether it was disingenuous to point to a groundswell of opposition to a la carte when so many of the letters were industry generated.

Dietz replied that "As a matter of policy, NCTA does not comment on our lobbying or PAC activity." But the association included a generic statement.

"Many of the individuals and organizations that have voiced opposition to a la carte are concerned that such regulation would further reduce diversity in media, which directly affects the constituents they represent. NCTA welcomes this support and will continue to work with organizations that are concerned about these issues," it reads in part.

So the question is, are the commissioners aware that the anti-a la carte comments they are being inundated with are not as spontaneous as they seem? And does it really matter?

The Center sent a list of detailed questions to FCC Chairman Michael Powell through a spokesman. Powell did not respond, but the Center was provided with a written statement from FCC Media Bureau Chief Kenneth Ferree.

"In the A La Carte proceeding, as with all FCC proceedings, we value, and read, comments from any and all persons and parties on all sides of the issue. Our job is to then evaluate the pros and cons, and strengths and weaknesses, of all the arguments, positions, and studies presented to us, and then make our best public policy judgments based on the entire record," it reads.

"It is interesting to note that the practice of a party on one side of an issue soliciting letters of support is not uncommon. For example, most recently, a very high percentage of letters in the media ownership rule proceeding were form letters generated by self-interested organizations. As to the A La Carte proceeding, we are in the process of evaluating the record at the present time and do not comment on any individual filings."

Currently, the anti-a la carte comments outnumber pro a la carte comments by about six to one. Among the pro camp are Consumers Union, the Consumer Federation of America, the New Jersey Ratepayer Advocate, the Urban Broadcasting Company and the city of Seattle. There is no indication of coordination among the comments filed supporting a la carte.

Wired for influence

Since 1998, the nation's cable television companies have spent $22.7 million in campaign contributions to national party organizations, members of Congress and presidential races. Leading the pack is Time Warner with $8.2 million. Second is Comcast at $3.2 million and third is the NCTA with $3.1 million.

The money came from PACs, soft money donations (before they were banned by the Bipartisan Campaign Reform Act of 2002) and individual contributions from company executives, employees and their families.

In addition to the donations, cable television companies can provide something worth more than greenbacks—airtime. No politician, no matter how skilled or principled, can turn his or her back on reaching large blocs of the voting public through public affairs programming.

Corporations can also play the sponsorship game. With millions to give away, the Time Warner Foundation funds good works all over the country, including the activities of civil rights groups.

The industry's trade group, the NCTA, is among the most deep-pocketed and influential lobbying organizations in Washington. The association has sponsored 102 trips worth $198,727 since 2000, flying members of Congress and their staff to various events around the country.

The NCTA is also a major sponsor of travel for FCC commissioners and staff, having spent $192,609 flying over an eight-year period, according to a previous Center study.

In addition to its campaign contributions and its all-expenses-paid junkets, the trade group spent more than $32 million* on lobbying since 1998. The NCTA's top lobbyist, Daniel Brenner, was senior legal adviser to former FCC Chairman Mark Fowler in the 1980s.

While campaign contributions get the most coverage in Washington politics, the real money is being spent on lobbying.

The cable television industry has been steadily increasing the amount it spends to sway opinion in Congress and the FCC. The industry spent more than $10 million* on lobbying in 1999 compared with more than $15 million* in 2003, a jump of 50 percent, according to lobbying records. The industry spent at least $88 million* total on lobbying from 1998 through mid-2004.

NCTA was first* followed closely by Time Warner at more than $27 million.*

While the dollar amount is impressive, it is the people who are doing the lobbying that are the real key.

The cable, broadcasting and telecommunications lobby in Washington is stacked with former FCC commissioners, bureau chiefs, top-level aides and former congressional staffers who have helped write communications laws.

For the cable industry alone, Center researchers were able to identify 17 former key government officials who now lobby Congress and the FCC. The "revolving door" situation at the FCC is so prevalent, it is at times difficult to keep straight whether someone is still in government or representing one communications firm or another.

Among former government officials who now work for the cable industry, the best known is Victoria Clarke, who had nothing to do with the FCC. Clark was the Pentagon spokeswoman during the Iraq war and is widely credited with creating the "embedding" system of attaching reporters to troops in the field. Clarke took a job with Comcast as senior adviser, communications and government affairs.

As to the a la carte issue specifically, the NCTA is using Brenner as well as Jill Luckett, vice president of program network policy, formerly a special adviser to former FCC Commissioner Rachelle Chong, and before that, legislative director for former Sen. Bob Packwood of Oregon.

Leslie Harris and Associates, whose clients include Time Warner and the Leadership Conference on Civil Rights, employs Jon Bernstein, who before becoming a lobbyist was an attorney adviser with the FCC. Prior to that, he was a lobbyist for the National Education Association.

Working for Viacom on the issue is Wiley Rein & Fielding. Richard E. Wiley heads the firm's 70-attorney communications practice, which it bills as the largest in the nation. Wiley was chairman of the FCC from 1970 to 1977 and was a chief advocate of deregulation of the communications industry. Lawrence W. Secrest III, a partner with the firm overseeing the media practice and Wiley's former assistant at the FCC, is also on the a la carte beat.

That's a lot of high-priced talent to be spending on what seems like a relatively small issue that is barely on the regulatory radar screen. The FCC is merely collecting comment for a report. There is no realistic expectation that the issue will make it into any legislation.

Kimmelman believes the lobbying campaign has more to do with the issue's potential than what it means right now. He believes that "there was a potential out-of-control grass-roots uprising against the way large cable and broadcast companies control programming and how it's distributed to the public," he said.

"I think they recognized this was so attractive to people from all political perspectives and so volatile in terms of spiraling cable rates and concerns about smarmy programming – they needed to deep six and absolutely wipe the debate off the ledgers before policy makers got into it."

Center researchers Mike Baxter, Daniel Lathrop and Katie Mills contributed to this report. John Dunbar is the Well Connected project manager.

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